For Immediate Release
Chicago, IL – June 24, 2016 – Zacks Equity Research highlights Baxter International (NYSE:BAX) (BAX) as the Bull of the Day and Fluor Corporation (NYSE:FLR) (FLR) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BlackRock, Inc. (BLK), Legg Mason Inc (NYSE:LM). (LM) and Invesco Ltd. (IVZ).
Here is a synopsis of all five stocks:
Baxter International (BAX) engages in the worldwide development, manufacture and distribution of a diversified line of products, systems and services used primarily in the health-care field. The company provides a portfolio of hospital and renal products that service to treat end-stage renal disease, irreversible kidney failure, and acute kidney therapies. The company's products are used by hospitals, clinical and medical research laboratories, blood and dialysis centers, rehabilitation centers, nursing homes, doctors' offices and by patients, at home, under physician supervision.
Baxter has posted positive earnings and has seen rising estimate revisions, which has helped the stock rise 18% higher year to date. The Deerfield, IL based company recently became a Zack Rank #1 (Strong Buy) making the stock the Bull of the Day.
Baxter has a market cap of $25 Billion with a Forward PE of 27. The company pays a dividend yield of 1.16% and has an expected 3-5 year EPS growth rate of 8.65%. Over the last two years the stock has outperformed the S&P 500 by returning almost 17% versus 6%. Most of this return has been in 2016, a time when most stocks are struggling to move higher. This outperformance in such a dull market says a lot about the strength of the stock and future price direction if equities were to finally breakout.
Fluor Corporation (FLR) delivers engineering, procurement, construction, maintenance (EPCM), and project management to governments and clients in diverse industries around the world. The Texas based company operates in five segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services, and Power. Fluor is a primary service provider to the United States Federal Government. It performs operations and maintenance activities for major industrial clients, and also operates and maintains their equipment fleet.
The company has a market cap of $7.2 Billion and has a Forward PE of 15. The stock sports a Zacks Style Scores of “D” in Momentum. The company has 3-5 year growth rate of 14.00% and dividend yield of 1.63%. However, a recent guidance cut with the combination of earnings revisions heading lower make the stock a Zacks Rank # 5 and today’s Bear of the Day.
Earnings
Fluor reported Q1 earnings on May 5th, seeing EPS at $0.85 verse the $0.86 expected. The company saw a slight beat on revenue, seeing $4.42 Billion verse the $4.41 Billion expected. In addition the company cut fiscal year 2016 guidance range to $3.25-3.65 verse the $3.65 expected. The previous range was $3.50-4.00.
The stock fell 8% on the news and has since grinded back close to pre earnings levels. Investors would be wise to sell shares due to falling earnings estimates for the rest of the year. The danger being that shares could dip back below $50/shares and challenge 2016 lows around $40.
Estimates
Over the last 60 days, the Fluor has seen estimates fall for both fiscal year 2016 and 2017. For the current year we have seen a 7.3% revision lower from $3.65 to $3.38. For next year, estimates have fallen 4.3%, from $3.68 to $3.52.
Additional content:
FSB Proposals: Asset Managers May Face Tough Scrutiny
Similar to “too-big-to-fail” banks, the $76 trillion asset management industry continues to be in the focus of the global regulatory bodies amid heightened regulations and scrutiny in the broader financial system post crisis. The Financial Stability Board (“FSB”) proposed 14 recommendations to address the contagion risks, given the structural vulnerabilities in asset management industry.
The FSB, a group of international regulators led by Bank of England's governor Mark Carney, called for additional oversight of exchange-traded, mutual and other funds, trading activities of which could potentially pose financial stability risks. According to the FSB, the funds should be able to sell assets to return investors their money even in stressed markets.
According to the FSB, the structural vulnerabilities in asset management industry included liquidity mismatch between fund investments and redemption terms and conditions for open-ended fund units, leverage within investment funds, securities lending activities of asset managers and funds as well as operational risk and challenges in transferring investment mandates in stressed conditions.
To address these structural vulnerabilities, the FSB proposed the following recommendations. Authorities should widen the availability of liquidity risk management tools to open-ended funds, while existing reporting requirements should be reviewed and improved to ensure adequacy.
Also, liquidity risk management tools should be made available to open-ended funds to reduce first-mover advantage. Moreover, the authorities should collect data on leverage in funds, monitor the use of leverage by funds and take action when appropriate.
Further, the International Organization of Securities Commissions (“IOSCO”) should collect national aggregated data on leverage across its member jurisdictions based on the simple and consistent measures it develops.
Also, system-wide and individual stress testing of asset managers similar to banks along with providing better disclosure to clients about risks involved in funds were among the 14 recommendations made by the FSB to authorities across the G20 nations on Wednesday.
Carney stated, “Given its increased importance, a resilient asset management sector is vital to finance strong, sustainable and balanced growth.”
Daniel Tarullo, Chair of the FSB Standing Committee on Supervisory and Regulatory Cooperation, said that “The proposed policy recommendations are designed to enhance the resilience of asset managers and funds to future stress in financial markets.”
The FSB proposals are to be implemented over two years from the end of 2017 after being finalized by the end of this year.
Assets under management rose from $50 trillion in 2004 to $76 trillion in 2014, according to the FSB. With the growth of the asset management industry, several risks and challenges have cropped up and the regulatory bodies continue to work on these issues and have taken up required measures.
Last year, the FSB dropped its plan to designate certain asset managers or funds as “systemically important” after resistance from the large players of the fund industry like BlackRock, Inc. (BLK), Fidelity Investments, Vanguard Group Inc. and Pacific Investment Management Co.
Tougher oversight proposed by the global regulatory bodies will surely not gel well with asset managers like BlackRock, Legg Mason Inc. (LM) and Invesco Ltd. ( IVZ). The firms believe their size do not pose a systemic risk to financial stability of the broader financial market.
However, we believe that though the new proposals, if implemented, can impact the revenue growth of the companies in this industry to some extent, the broader system will be secured from any potential downturn.
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BAXTER INTL (BAX): Free Stock Analysis Report
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
BLACKROCK INC (BLK): Free Stock Analysis Report
LEGG MASON INC (LM): Free Stock Analysis Report
INVESCO LTD (IVZ): Free Stock Analysis Report
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